Mergers, Acquisitions and Financial Results

Telekom Malaysia Bhd’s joint venture company Thintana Communications LLC is reducing its stake in South African telecommunications provider Telkom SA Ltd, by offering for sale as many as 33.2 million shares. Telekom Malaysia holds a 40% stake in Thintana while SBC Communications Bhd holds the other 60%. Thintana has a 30% interest in Telkom.

"The sale, subject to demand, price and market conditions, would be conducted through a private placement to institutional investors," Telekom Malaysia said in a statement on June 16. It said that Thintana had earlier announced its intention to reduce its stake in the South African company to not less than 15.1%.

After the sale, SBC and Telekom Malaysia would retain 9% and 6% indirect interests respectively in Telkom. "Telkom SA will not receive any proceeds from the offering. In connection with the offering, Thintana will enter into a lock-up agreement on the remaining 15.1% holding in Telkom SA," it said. The agreement will remain effective until Telkom’s interim results for the period ending Sept 30, 2004, are released, expected to be on Nov 22.

According to a Reuters report, Telkom chief executive Sizwe Nxasana said at a results briefing last week that the firm would buy back its shares in a "liquidity event". Asked whether this applied to Thintana’s planned sale, Telkom spokesman Andrew Weldrick told Reuters on June 14 that the firm could not comment on the private placement, but added: "I wouldn’t imagine that would preclude Telkom."

Analysts said this should be a relief to investors since it reduced the threat of an overhang and any possible cap on the share price that would accompany it. Telkom’s biggest shareholder ‹ the South African government ‹ is expected to hold on to its stake of around 37%, until at least March 2005.

SBC spokeswoman Anne Vincent said the company had decided to take a more "opportunistic" approach to its international investments. She said given a tripling of Telkom’s stock price over the past year, as well as interest rate and currency exchange trends, SBC decided it was time to sell half its stake.

Last week, SBC announced it would sell its 23.7% holding in Danish telecommunications firm TDC worth more than US$2 billion (RM7.60 billion). At current prices, SBC’s stake in Telkom is valued at about US$600 million.

The Edge Daily